THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT · PDF file02.03.2014 · No. 15-20 THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT ALLCO FINANCE LIMITED, Plaintiff-Appellant

No. 15-20

THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

ALLCO FINANCE LIMITED,

Plaintiff-Appellant

v.

ROBERT KLEE, in his Official Capacity as Commissioner of the Connecticut Department of Energy and Environmental Protection,

Defendant-Appellee

and

NUMBER NINE WIND FARM LLC, FUSION SOLAR CENTER LLC, and the CONNECTICUT OFFICE OF CONSUMER COUNSEL,

Intervenors-Appellees, __________________________________________

Appeal from the United States District Court for the District of Connecticut No. 3:13-cv-01874

Hon. Janet Bond Arterton

___________________________________________________

OPENING BRIEF OF APPELLANT ___________________________________________________

Thomas Melone, Esq.

Allco Renewable Energy Limited 77 Water Street, 8th floor New York, New York 10005 (212) 681-1120 [email protected]

February 26, 2015

Case 15-20, Document 39, 03/06/2015, 1454228, Page1 of 80

i

CORPORATE DISCLOSURE STATEMENT Allco Finance Limited is a privately held company in the

business of developing solar energy projects. It has no parent

companies, and no publicly held company owns 10 percent or more of

its stock.

/s/ Thomas Melone


ii

TABLE OF CONTENTS

CORPORATE DISCLOSURE STATEMENT ........................................ i

TABLE OF AUTHORITIES ................................................................ iv

JURISDICTIONAL STATEMENT ....................................................... 1

STATEMENT OF ISSUES ................................................................... 2

STATEMENT OF THE CASE .............................................................. 3

A. Legal Background ........................................................................... 5

1. The Federal Power Act and Competitive Wholesale Electricity Markets ....................................................................... 5

2. Policies Encouraging Renewable Energy Generation ................. 9

B. The Connecticut Procurement at Issue ........................................ 12

C. Proceedings in the District Court ................................................. 15

SUMMARY OF ARGUMENT .................................................................. 18

ARGUMENT ............................................................................................. 21

I. Standard of Review .................................................................... 21 II. The District Court Erred in Holding That Allco Lacked

Standing ..................................................................................... 22

A. Allco Has Article III Standing .............................................. 22 1. Allco’s Loss of the Contract Is Sufficient to

Establish Standing ....................................................... 23 a. Allco established injury-in-fact ................................ 24


iii

b. Allco established causation ...................................... 26

c. Allco established redressability ............................... 26

2. Allco’s Reduced Prospective Earnings Under PURPA Are Sufficient to Establish Standing ............. 33

B. Allco Has Prudential Standing ............................................. 38

III. Allco’s Complaint Stated a Preemption Claim .......................... 48

A. Legal Standard Governing Preemption ..................................... 48

B. FERC Enjoys Exclusive Authority to Regulate Wholesale Electricity Sales, and Has Used That Authority to Implement a Market-Based Regulatory Scheme ...................... 50

C. The Commissioner’s Order Compelling a Contract With

Number Nine Wind Farm Is Preempted ................................... 52

1. The Commissioner Has Unlawfully Regulated in the Field of Wholesale Sales and, Moreover, Has Acted in Conflict With FERC’s Policy .............................. 52

2. Recent Decisions by the Third and Fourth Circuits

Confirm That the Commissioner’s Actions Were Preempted .......................................................................... 56

3. The Commissioner’s Actions Do Not Fall Within

the State’s Authority to Direct Utility Planning and Resource Decisions ..................................................... 60

IV. The District Court Erred in Dismissing Allco’s Claim

Under 42 U.S.C. §1983 .......................................................... 63 CONCLUSION ................................................................................... 68


iv

TABLE OF AUTHORITIES

CASES

American Paper Institute, Inc. v. American Electric Power Service Corp., 461 U.S. 402 (1983) ................................................................... 10

Arizona v. United States, 132 S. Ct. 2492 (2012).................................... 49

Ashcroft v. Iqbal, 566 U.S. 622 (2009) ............................................... 21, 29

B.K. Instrument, Inc. v. United States, 715 F.2d 713 (2d Cir. 1983) ..................................................................................................... 23

Blumenthal v. FERC, 552 F.3d 875 (D.C. Cir. 2009) .................... 9, 51, 52

Carlson v. Green, 446 U.S. 14 (1980) ................................................ 65, 66

Chabad Lubavitch of Litchfield County, Inc. v. Litchfield Historic District Commission, 768 F.3d 183 (2d Cir 2014), petition for cert. filed, No. 14-1001 ......................................................................... 47

Clinton v. City of New York, 524 U.S. 417 (1998) ................ 24, 25, 26, 27

Connecticut Department of Public Utility Control v. FERC, 569 F.3d 477 (D.C. Cir. 2009) ..................................................................... 60

Crosby v. National Foreign Trade Council, 530 U.S. 363 (2000) 48, 49-50

FEC v. Akins, 524 U.S. 11 (1998) ............................................................ 31

FERC v. Mississippi, 456 U.S. 742 (1982) ............................................... 44

FPC v. Southern California Edison Co., 376 U.S. 205 (1964) ...... 7, 50, 55

Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167 (2000) ......................................................... 28

Gonzaga University v. Doe, 536 U.S. 273 (2002) .................................... 64

Gosnell v. FDIC, 938 F.2d 372 (2d Cir. 1991) ............................. 46, 47, 48


v

Louisiana Energy & Public Authority v. FERC, 141 F.3d 364 (D.C. Cir. 1998) .............................................................................................. 43

Maine v. Thiboutot, 448 U.S. 1 (1980) ..................................................... 63

Marshall v. Switzer, 10 F.3d 925 (2d Cir. 1993) ..................................... 64

Middlesex County Sewage Authority v. National Sea Clammers Ass’n, 453 U.S. 1 (1981) ....................................................................... 65

Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354 (1988) ..................................................................................... 54

Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139 (2010) ................. 32

Morgan Stanley Capital Group Inc. v. Public Utility District Number 1 of Snohomish County, 554 U.S. 527 (2008) ................... 9, 52

National Credit Union Administration v. First National Bank & Trust Co., 522 U.S. 479 (1998) .......................................... 41, 42, 45, 46

Natural Resources Defense Council, Inc. v. FDA, 710 F.3d 71 (2d Cir. 2013) ......................................................................................... 24-25

New England Power Co. v. New Hampshire, 455 U.S. 331 (1982) ........ 50

New York v. FERC, 535 U.S. 1 (2002) ....................................... 6, 7, 51, 63

Niagara Mohawk Power Corp. v. FERC, 306 F.3d 1264 (2d Cir. 2002) ................................................................................................ 65-66

NSTAR Electric & Gas Corp. v. FERC, 481 F.3d 794 (D.C. Cir. 2007) ....................................................................................................... 9

Orion Technology, Inc. v. United States., 704 F.3d 1344 (Fed. Cir. 2013) ..................................................................................................... 28

Pennsylvania Water & Power Co. v. FPC, 193 F.2d 230 (D.C. Cir. 1951), aff’d, 343 U.S. 414 (1952) .......................................................... 50

Pharmaceutical Research & Manufacturers of America v. Concannon, 249 F.3d 66 (1st Cir. 2001) .............................................. 39


vi

PJM Interconnection, L.L.C., 135 FERC ¶ 61,022 (2011), clarified on reh’g, 137 FERC ¶ 61,145 (2011) .................................................... 60

PPL EnergyPlus LLC v. Hanna, 977 F. Supp. 2d 372 (D.N.J. 2013), aff’d, 766 F.3d 241 (3d Cir. 2014), petitions for cert. filed, Nos. 14-634, 14-694 .............................................................................. 57

PPL EnergyPlus LLC v. Nazarian, 753 F.3d 467 (4th Cir. 2014), petitions for cert. filed, Nos. 14-614, 14-623 ............................... passim

PPL EnergyPlus LLC v. Nazarian, 974 F. Supp. 2d 790 (D. Md. 2013), aff’d, 753 F.3d 467 (4th Cir. 2014), petitions for cert. filed, Nos. 14-614, 14-623 .................................................................... 57

PPL EnergyPlus LLC v. Solomon, 766 F.3d 241 (3d Cir. 2014), petitions for cert. filed, Nos. 14-634, 14-694 ............... 17, 20, 56, 57, 58

Public Utilities Commission v. Attleboro Steam & Electric Co., 273 U.S. 83 (1927) ......................................................................................... 6

Public Utility District Number 1 of Snohomish County v. Dynegy Power Marketing, Inc., 384 F.3d 756 (9th Cir. 2004) ......................... 52

Public Utility District Number 1 v. IDACORP, Inc., 379 F.3d 641 (9th Cir. 2004) ...................................................................................... 51

Scenic Hudson Preservation Conference v. FPC, 354 F.2d 608 (2d Cir. 1965) .............................................................................................. 43

Schneidewind v. ANR Pipeline Co., 485 U.S. 293 (1988) ....................... 61

Selevan v. New York Thruway Authority, 584 F.3d 82 (2d Cir. 2009) ............................................................................................... 21, 41

Silkwood v. Kerr-McGee Corp., 464 U.S. 238 (1984) .............................. 49

Smith v. Robinson, 468 U.S. 992 (1984) .................................................. 67

Susan B. Anthony List v. Driehaus, 134 S. Ct. 2334 (2014) .................. 40

Taubman Realty Group Ltd. Partnership v. Mineta, 320 F.3d 475 (4th Cir. 2003) ...................................................................................... 40


vii

Thompson v. County of Franklin, 15 F.3d 245 (2d Cir. 1994) ................ 21

Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (D.C. Cir. 2000, aff’d, 535 U.S. 1 (2002) ......................................... 50-51

United States v. Locke, 529 U.S. 89 (2000) ............................................. 51

Utah v. Evans, 536 U.S. 452 (2002) ................................................... 30, 31

Wheelabrator Lisbon, Inc. v. Connecticut Department of Public Utility Control, 531 F.3d 183 (2d Cir. 2008) ....................................... 65

Wilderness Society v. Kane County, 632 F.3d 1162 (10th Cir. 2011) ..................................................................................................... 40

W.R. Huff Asset Management Co., LLC v. Deloitte & Touche LLP, 549 F.3d 100 (2d Cir. 2008) ................................................................. 22

WSPP Inc., 139 FERC ¶ 61,061 (2012) .................................................... 12

STATUTES

16 U.S.C. § 796(17)(A) .................................................................... 3, 10, 14

16 U.S.C. § 824(b)(1) ......................................................... 3, 6, 7, 55, 60, 63

16 U.S.C. § 824(d) ....................................................................................... 6

16 U.S.C. § 824a-3 ................................................................................ 3, 44

16 U.S.C. § 824a-3(a) ................................................................................ 10

16 U.S.C. § 824a-3(a)(2) ...................................................................... 34, 35

16 U.S.C. § 824a-3(b) .......................................................................... 10, 34

16 U.S.C. § 824a-3(d) .......................................................................... 10, 34

16 U.S.C. § 824a-3(f)(1) ............................................................................ 11

16 U.S.C. § 824d(a) ............................................................................. 51, 55

16 U.S.C. § 825p ......................................................................................... 1


viii

28 U.S.C. § 1291.......................................................................................... 1

28 U.S.C. § 1331.......................................................................................... 1

28 U.S.C. § 1491(b)(1) ............................................................................... 23

Conn. Gen. Stat. § 16-1(20) ...................................................................... 11

Conn. Gen. Stat. § 16-245a ...................................................................... 11

Conn. Gen. Stat. § 16-245a(a)(15) ............................................................ 11

Conn. Gen. Stat. § 16-245a(b) .................................................................. 12

Conn. Gen. Stat. § 16-245a(g) .................................................................. 12

LEGISLATIVE MATERIALS

Conn. Public Act 03-135 § 4(c), available at http://www.cga.ct.gov/ 2003/act/Pa/2003PA-00135-R00SB-00733-PA.htm .............................. 8

Conn. Public Act 13-303 § 6 ........................................................... 4, 12, 13

Conn. Public Act 98-28, available at http://www.cga.ct.gov/ps98/ Act/pa/1998PA-00028-R00HB-05005-PA.htm. ..................................... 8

H.R. Rep. No. 95-496(IV) (1978) .............................................................. 10

OTHER AUTHORITIES

18 C.F.R. § 292.303(a) ........................................................................ 34, 35

18 C.F.R. § 292.304(b)(2) .................................................................... 10, 34

18 C.F.R. § 292.304(d)(2)(ii) ..................................................................... 34

Brief of the Maryland Public Service Commission, PPL EnergyPlus v. Nazarian, No. 13-2419, 2014 WL 413948 ................... 43

Order No. 69: Final Rule Regarding the Implementation of Section 210 of the Public Utility Regulatory Policies Act of 1978, 45 Fed. Reg. 12,214 (Feb. 19, 1980) (codified at 18 C.F.R. pt. 292) ........ 35


ix

U.S. Energy Information Admin., “Most states have Renewable Portfolio Standards,” available at http://www.eia.gov/ todayinenergy/detail.cfm?id=4850. ..................................................... 11


1

JURISDICTIONAL STATEMENT

This case involves a preemption challenge, under the Supremacy

Clause and the Federal Power Act, to actions taken by the

Commissioner of the Connecticut Department of Energy and

Environmental Protection (“the Commissioner” and “the Department,”

respectively). The District Court had jurisdiction under 28 U.S.C.

§ 1331 because the claims arise under the Supremacy Clause and under

16 U.S.C. § 825p, which vests district courts with jurisdiction of

violations of the Federal Power Act or the rules, regulations, and orders

thereunder and “all suits” “to enforce any liability or duty” under the

Federal Power Act.

On December 10, 2014, the District Court issued an Order

dismissing the case for lack of standing and failure to state a claim and

awarding final judgment to the Commissioner disposing of all of the

parties’ claims. A204-224, A225.1 Plaintiff-Appellant Allco Finance

Limited (“Allco”) timely filed a notice of appeal on January 2, 2015.

A226. This Court has jurisdiction over the appeal under 28 U.S.C.

§ 1291.

1 A__ refers to the Joint Appendix.


2

STATEMENT OF ISSUES

1. Whether Allco has standing to bring its claims.

2. Whether the Commissioner’s action compelling a wholesale

energy transaction violates the Federal Power Act and is preempted

under the Supremacy Clause of the United States Constitution.

3. Whether Allco has potential claims under 42 U.S.C. § 1983.


3

STATEMENT OF THE CASE

Under the Federal Power Act, Congress reserved to the Federal

Energy Regulatory Commission (“FERC”) the exclusive authority to

regulate wholesale sales of electricity in interstate commerce. 16 U.S.C.

§ 824(b)(1). States are not permitted to act in that field. In the Public

Utility Regulatory Policies Act (“PURPA”), Congress carved out a

narrow exception to that general rule to foster electric generation by

generators that were smaller than a certain size and that used

renewable generation technology. 16 U.S.C. § 824a-3; id. § 796(17)(A).

Generators falling within PURPA are known as “Qualifying Facilities,”

and states are permitted to regulate wholesale sales by Qualifying

Facilities, provided that they receive a price for their electricity equal to

the buying utility’s “avoided costs” – that is, equal to the costs that the

utility would otherwise have incurred procuring the same quantity of

electricity from another source. Allco is in the business of developing

Qualifying Facilities.

In 2013, Connecticut enacted a statute empowering the

Commissioner to solicit proposals for renewable energy, to select

winners of the solicitation, and to compel Connecticut’s two electric


4

utilities to enter into wholesale electricity contracts with the winners.

Conn. Public Act 13-303 § 6 (“Section 6”). Allco submitted bids for a

number of its Qualifying Facilities. A9 ¶ 33; A13 ¶ 46.

Notwithstanding the Federal Power Act’s general prohibition on

state regulation of wholesale electricity sales – subject only to the

limited exception for sales by Qualifying Facilities under PURPA – in

September 2013, the Commissioner compelled the electric utilities to

enter a contract with a generator, Number Nine Wind Farm (“Number

Nine Wind”), that was much too large to be a Qualifying Facility. A53.

As a consequence, at least one of Allco’s projects was not selected. The

Commissioner also compelled the electric utilities to enter a contract

with Fusion Solar Center (“Fusion Solar”), a generator that could

qualify as a Qualifying Facility.

On February 26, 2014, Allco filed an Amended Complaint

(“Complaint”) contending that the Commissioner’s actions were

preempted by the Federal Power Act. A3-A23. It sought a declaration

that the Commissioner’s order compelling the utilities to enter contracts

with Number Nine Wind and Fusion Solar, and the resulting contracts

themselves, were invalid; and it sought an injunction restraining the


5

Commissioner from violating the Federal Power Act when conducting

future procurements. A23. Allco also sought attorney’s fees under 42

U.S.C. §§ 1983 and 1988 and relief from the Commissioner

impermissibly discriminating against one of Allco’s projects in favor of

the Fusion Solar project.

On December 10, 2014, District Court Judge Janet Bond Arterton

granted the Commissioner’s motion to dismiss. See Allco Finance

Limited v. Klee, Civ. A. No. 13-cv-1874, 2014 WL 7004024 (D. Conn.

Dec. 10, 2014) (A204-A224). The District Court held that Allco lacked

standing to bring its claims and that Allco had failed to state a

preemption claim. This timely appeal followed.

A. Legal Background.

1. The Federal Power Act and Competitive Wholesale Electricity Markets.

For most of the twentieth century, electric utilities were vertically

integrated companies that enjoyed a monopoly over a service area, and

both generated electricity and delivered it to retail customers within

that service area. Because utilities typically operated within a single

state, they were subject to extensive state regulation. State

commissions set the electricity rates that utilities could charge their


6

retail customers in order to allow the utilities to recover the costs

associated with generating and delivering electricity, plus a reasonable

rate of return. See New York v. FERC, 535 U.S. 1, 5 (2002).

Utilities began to recognize the advantage of being able to draw

upon generation resources owned by other utilities to satisfy demand at

peak times, and they began constructing transmission lines running

across service areas and across state boundaries. Initially, interstate

sales of electricity were unregulated. The Supreme Court had held that

states were powerless to regulate such sales under the Commerce

Clause, see Public Utilities Commission v. Attleboro Steam & Electric

Co., 273 U.S. 83, 389 (1927), resulting in what became known as “the

Attleboro gap.” New York, 535 U.S. at 5-6.

In 1935, Congress enacted the Federal Power Act to fill that gap,

as well as to “extend[] federal coverage to some areas that previously

had been state regulated.” Id. at 6. Specifically, Congress gave the

Federal Power Commission – now FERC – exclusive authority to

regulate “the sale of electric energy at wholesale in interstate

commerce.” 16 U.S.C. § 824(b)(1). “[W]holesale,” in this context, means

any “sale of electric energy to any person for resale.” Id. § 824(d). Thus,


7

any sale of electricity in interstate commerce (with the exception of

sales under PURPA, discussed infra at 9-11, and another exception not

relevant here for certain hydroelectric energy) falls within FERC’s

exclusive regulatory authority, unless it is a “retail” sale to the factory,

business, or home that will actually consume the electricity. See FPC v.

S. Cal. Edison Co., 376 U.S. 205, 215 (1964) (Congress left “no power in

the states to regulate … sales for resale in interstate commerce.”).

Although Congress occupied the field of wholesale electricity sales, it

reserved “except as specifically provided”, a state’s authority that the

state previously enjoyed “over facilities used for the generation of

electric energy or over facilities used in local distribution,” 16 U.S.C.

§ 824(b)(1).

As the interstate electricity transmission grid developed, and as

technology improved for transmitting electricity over long distances,

interstate wholesale electricity markets became increasingly important.

New York, 535 U.S. at 7-8. In the 1990s, Congress and FERC began to

recognize the benefits of promoting competition in the market for

electric generation. Id. at 10-11. Many states followed suit, including

Connecticut. In 1998, Connecticut restructured its electricity market in


8

order to rely on the competitive interstate wholesale electricity market.

Conn. Public Act 98-28 (“Restructuring Act”).2 Connecticut utilities

divested their generation assets to competitive generation companies

that sold power in the wholesale market, id. § 5, and entities known as

retail electric suppliers bought electricity in the wholesale market and

competed for the opportunity to resell it to retail customers. The

utilities continue to enjoy a monopoly over the service of distributing

electricity over their network of wires. They also purchase electricity on

the wholesale market to sell to retail customers that have not chosen

another retail electric supplier. Conn. Public Act 03-135 § 4(c).3

Today, the wholesale electricity market in New England is

overseen by ISO-New England, Inc., a FERC-regulated Independent

System Operator. ISO-New England operates an energy market, in

which generators compete to sell electricity by submitting “bids” in real

time. ISO-New England matches supply and demand on a continuing

basis, and, using a FERC-approved auction process, determines the

2 The Restructuring Act is available at http://www.cga.ct.gov/ps98/Act/pa/1998PA-00028-R00HB-05005-PA.htm. 3 Conn. Public Act 03-135 is available at http://www.cga.ct.gov/2003/act/Pa/2003PA-00135-R00SB-00733-PA.htm.


9

market price for electricity based on the bid of the least costly

generation resource needed for supply to match demand. See

Blumenthal v. FERC, 552 F.3d 875, 878 (D.C. Cir. 2009); NSTAR Elec.

& Gas Corp. v. FERC, 481 F.3d 794, 797 (D.C. Cir. 2007). This method

is intended to result in the operation of the most efficient set of

generation resources at any particular point in time. Generators also

sell electricity to wholesale buyers in freely negotiated, voluntary

bilateral contracts, pursuant to FERC-approved market-based tariffs.

“These tariffs, instead of setting forth rate schedules or rate-fixing

contracts, simply state that the seller will enter into freely negotiated

contracts with purchasers.” Morgan Stanley Capital Grp. Inc. v. Pub.

Util. Dist. No. 1 of Snohomish Cnty, 554 U.S. 527, 537 (2008).

2. Policies Encouraging Renewable Energy Generation.

Because renewable energy is typically more expensive to generate

than energy using conventional fuels, renewable generators would have

difficulty competing with conventional generation. However, both

Congress and many states have enacted policies to promote renewable

power.


10

In 1978, Congress enacted PURPA to “accelerate the development

of renewable and inexhaustible energy sources…” H.R. Rep. No. 95-

496(IV), at 14 (1978). It directed FERC to adopt rules, and for state

commissions to implement those rules, requiring utilities to purchase

power from certain types of renewable generators known as Qualifying

Facilities, 16 U.S.C. § 824a-3(a)– specifically, and as relevant here,

generators that “produce[] electric energy solely by the use, as a

primary energy source, of biomass, waste, renewable resources,

geothermal resources, or any combination thereof; and … ha[ve] a

power production capacity which … is not greater than 80 megawatts.”

16 U.S.C. § 796(17)(A). Congress and FERC further directed that

Qualifying Facilities were to be paid at a rate equal to the utility-

buyer’s “avoided costs” – that is, the costs that the utility would

otherwise have incurred but for its purchase from the Qualifying

Facility. 16 U.S.C. § 824a-3(b), (d); 18 C.F.R. § 292.304(b)(2); see also

Am. Paper Inst., Inc. v. Am. Elec. Power Serv. Corp., 461 U.S. 402, 417

(1983). Under PURPA, states are in charge of implementing and

applying rules to require utilities to purchase from Qualifying

Facilities, and states retain some flexibility in determining the utility’s


11

avoided costs. 16 U.S.C. § 824a-3(f)(1). In these respects, PURPA

reflects a limited exception to FERC’s otherwise exclusive authority

over wholesale electricity sales.

In addition to implementing PURPA, states have also tried to

encourage the growth of renewable generation by adopting “renewable

portfolio standards.”4 These require utilities and other retail electric

suppliers doing business in a state to procure a certain percentage of

their electric supply from certain types of generators. Thus, for

example, Connecticut has required the utilities and other retail electric

suppliers in that state to obtain increasing amounts of their electricity

in from renewable sources, rising to over 20 percent in 2020. Conn.

Gen. Stat. § 16-245a(a)(15).

State renewable portfolio standards do not facially mandate any

particular wholesale transaction. Rather, they leave each wholesale

buyer/retail supplier to voluntarily negotiate contracts with renewable

generators in order to satisfy the portfolio requirement. See, e.g., Conn.

Gen. Stat. § 16-245a; id. § 16-1(20). Utilities and other retail suppliers

4 See, e.g., U.S. Energy Information Admin., “Most states have Renewable Portfolio Standards,” available at http://www.eia.gov/todayinenergy/detail.cfm?id=4850.


12

demonstrate compliance with renewable portfolio standards by

obtaining renewable energy credits (“RECs”), which reflect the

“environmental attributes” of electricity generated using renewable

fuel. E.g., Conn. Gen. Stat. § 16-245a(b). Sometimes utilities and retail

suppliers voluntarily negotiate contracts for electricity and RECs. But

RECs can also be bought and sold independent of electricity; thus,

renewable generators frequently will sell their RECs to utilities through

a negotiated contract, and separately sell the electricity into the energy

market administered by ISO-New England. E.g., Conn. Gen. Stat. § 16-

245a(g). When RECs are sold independent of electricity, FERC

generally regards the sale of RECs as outside its authority over

wholesale electricity sales. See WSPP Inc., 139 FERC ¶ 61,061, P 24

(2012) (“[A]n unbundled REC transaction that is independent of a

wholesale electric energy transaction does not fall within the

Commission’s jurisdiction under sections 201, 205 and 206 of the

[Federal Power Act].”).

B. The Connecticut Procurement at Issue.

In 2013, Connecticut enacted Conn. Public Act 13-303 § 6

(“Section 6”), which empowers the Commissioner to solicit proposals for


13

renewable energy, to select winners among the proposals, and to compel

the state’s utilities to enter into long-term wholesale power purchase

agreements serving up to four percent of Connecticut’s electricity needs.

Section 6 provides:

On or after January 1, 2013, the Commissioner … may … solicit proposals, in one solicitation or multiple solicitations, from providers of Class I renewable energy sources … If the commissioner finds such proposals to be in the interest of ratepayers … [he or she] may select proposals from such resources to meet up to four per cent of the load distributed by the state’s electric distribution companies. The commissioner may direct the electric distribution companies to enter into power purchase agreements for energy, capacity, and environmental attributes, or any combination thereof, for periods of not more than twenty years…

Conn. Public Act 13-303 § 6.

In July 2013, the Commissioner solicited proposals pursuant to

Section 6. A24-A51. Allco submitted proposals for five solar projects,

each of which was no more than 80 megawatts and thus satisfied

PURPA’s criteria for a Qualifying Facility. A205; A12 ¶ 45.

In September 2013, the Commissioner selected two winning

projects, Number Nine Wind, a 250 megawatt wind project located in

Maine, and Fusion Solar, a 20 megawatt solar project located in

Connecticut, and directed the state’s utilities “to execute contracts for a


14

combination of energy and environmental attributes” from these two

generation facilities. A53. While Fusion Solar satisfied the size

requirements to be a Qualifying Facility under PURPA, Number Nine

Wind did not; as noted above, PURPA limits Qualifying Facilities to no

more than 80 megawatts. 16 U.S.C. § 796(17)(A).

Number Nine Wind received a 15-year contract at a fixed price of

$57.17 per megawatt-hour of energy. A74. As the contract itself makes

clear, that fixed price will differ from the price that Number Nine Wind

otherwise would have received from selling its electricity into the

FERC-approved energy market administered by ISO-New England. See

A74 (setting forth the contract price and contrasting it with the “Market

Price”); see also A88 (defining “Market Price” as the price set by the

ISO-New England markets); A118 ¶ 80.

In an accompanying determination, the Department “describ[ed]

the basis for its selection of [these] two renewable energy projects to

enter into long-term power purchase agreements pursuant to Section 6.”

A55. In so doing, the Department set forth a ranked list of proposals.

Allco’s Harwinton Solar project appeared fourth on that list. A67; A13

¶ 46. Other Allco projects ranked seventh (Bozrah Solar), tenth (Bucks


15

Solar), and thirteenth (Franklin Solar). Id. Additionally, Allco bid a

project at a lower price than Fusion Solar, but that project was

inexplicably excluded from the ranked list. A13 ¶¶ 47-48.

C. Proceedings in the District Court.

Allco filed a Complaint in District Court alleging that the

Commissioner’s implementation of Section 6 was preempted by the

Federal Power Act, under both a “field preemption” theory – because

the Commissioner, in compelling a wholesale transaction, regulated in

an area reserved exclusively for FERC, A17-A18 ¶¶ 76, 79, 84-85 – and

a “conflict preemption” theory, because the Commissioner’s action

conflicted with the market-based system of regulation established by

FERC for the New England market. A18 ¶ 80; A20 ¶¶ 92-94. The

Complaint alleged that the Commissioner’s action in compelling a

wholesale electricity transaction could be lawful only with respect to a

Qualifying Facility under PURPA; yet Number Nine Wind was too large

to be a Qualifying Facility. A14 ¶ 59.

The District Court dismissed the suit on two grounds. First, it

held that Allco lacked standing, both because it lacked a cognizable

injury-in-fact and because it failed to demonstrate that its injury was


16

redressable. A209-A215. With regard to injury-in-fact, the District

Court acknowledged that the “true injury alleged is the denial of the

contract,” A213, and did not deny that such an injury could constitute

an injury-in-fact for purposes of Article III, but nevertheless held as a

prudential matter that such an injury fell outside the “zone of interests”

protected by the Federal Power Act. A211-A212. The District Court

next found that Allco failed to demonstrate that such an injury would be

redressable. A213. Although it acknowledged that Allco needed merely

to show that redressability was “likely,” not certain, A213, it held that

“given the Commissioner’s discretion to select projects, it does not

necessarily follow that if Number Nine were not selected, Allco’s

projects” – including its fourth-ranked Harwinton Solar project – “would

have been.” A214. The court also noted that there was no guarantee

that the Commissioner would conduct another procurement even if

Allco prevailed, and that the Commissioner could not “make a

redetermination based on the original ranks cited by Allco, because

bidders were only required to keep their bids open for six months and

the bids have now expired.” A214.


17

The District Court further held that Allco had failed to state a

preemption claim. A215-A222. The court reasoned that the

Commissioner could not have intruded into the field of wholesale

electricity regulation reserved for FERC, because bidders were able to

offer to sell electricity at whatever price they wished, and the

Commissioner simply ordered the utilities to accept the prices offered

by certain bidders. A217-A218. The District Court then distinguished

the present case from PPL EnergyPlus LLC v. Nazarian, 753 F.3d 467

(4th Cir. 2014), pet’n for cert. filed, Nos. 14-614, 14-623, and PPL

EnergyPlus LLC v. Solomon, 766 F.3d 241 (3d Cir. 2014), pet’n for cert.

filed, Nos. 14-634, 14-694. Those cases held preempted Maryland and

New Jersey programs in which the two state public utility commissions

conducted solicitations to receive bids from generators to build a new

power plant. The bids reflected the fixed revenue stream the generators

needed to construct the plant. The state commissions reviewed the

bids, selected the winners, and ordered the states’ utilities to enter into

contracts providing the winners with the requested revenue stream.

According to the District Court, the cases were distinguishable because

the Maryland and New Jersey programs involved “market distortion,”


18

whereas Section 6 was “devoid of any such market-distorting features.”

A222.

Finally, the District Court dismissed Allco’s claim under 42 U.S.C.

§ 1983 on the ground that the Federal Power Act did not create any

individual federal rights that could be enforced under Section 1983.

A223. This appeal followed.

SUMMARY OF THE ARGUMENT

1. The District Court erred in holding that Allco lacked

standing to bring its claims. First, Allco has constitutional standing. It

suffered a plain pocketbook injury caused by the Commissioner’s award

of a valuable energy contract to its direct competitor. That injury would

be redressed by a judgment in Allco’s favor – if the Commissioner’s

illegal procurement was invalidated, there is a strong likelihood both

that Allco would prevail in a future procurement under Section 6, and

that it would sell its energy at a higher price even in the absence of a

future procurement. The District Court concluded that Allco could not

show redressability because there was no certainty that the

Commissioner would conduct a future procurement or that Allco would

prevail in that procurement. But that analysis both misapprehended


19

the proper standard for redressability in the bid procurement context,

and ignored Allco’s contention that it was harmed by the procurement’s

effect on energy rates regardless of whether the Commissioner

conducted a second procurement.

Second, Allco has prudential standing. To the extent the

prudential standing doctrine has any force in the context of a

Supremacy Clause challenge to state action, Allco, as a market

participant, plainly falls within the zone of interests protected by the

Federal Power Act and PURPA. The District Court held that Allco

lacked prudential standing based on a single 24-year-old case that

turned on particular features of a statute, FIRREA, that is the polar

opposite of the Federal Power Act. No court has ever denied prudential

standing to a plaintiff asserting a Supremacy Clause challenge in

remotely comparable circumstances, and this Court should not be the

first.

2. The District Court erred in dismissing Allco’s preemption

claim. First, Allco stated a field preemption claim: The Commissioner’s

decision to force a utility to enter a wholesale power contract plainly

constitutes regulation in the field of wholesale energy sales, which is


20

categorically preempted. The Third and Fourth Circuits have recently

invalidated materially indistinguishable programs on field preemption

grounds. PPL EnergyPlus LLC v. Nazarian, 753 F.3d 467 (4th Cir.

2014), pet’n for cert. filed, Nos. 14-614, 14-623; PPL EnergyPlus LLC v.

Solomon, 766 F.3d 241 (3d Cir. 2014), pet’n for cert. filed, Nos. 14-634,

14-694.

Second, Allco stated a conflict preemption claim. FERC has

adopted a market-based approach to regulating the energy markets in

New England. Under that framework, FERC has approved an auction-

based energy market in which generators compete in real time to

provide energy at lowest cost. It has also allowed generators to enter

into voluntarily negotiated long-term contracts. In ordering

Connecticut utilities to contract with Number Nine Wind, the

Commissioner pursued a conflicting regulatory framework – one in

which the state can compel a utility to enter into a non-voluntary

wholesale power transaction at a price that differs from the prevailing

market price. Not only does that framework conflict with FERC’s

chosen regulatory approach, but it also undermines the special


21

treatment that Congress intended to give to small renewable generators

under PURPA. This is the epitome of a conflict with federal law.

Finally, the District Court erred in dismissing Allco’s claim under

42 U.S.C. §1983. Neither the Federal Power Act nor PURPA provide a

“comprehensive” remedial scheme such that an action under 42 U.S.C.

§1983 is implicitly excluded.

ARGUMENT

I. Standard of Review.

This Court reviews de novo a district court’s dismissal of a

complaint for lack of standing and for failure to state a claim. Selevan

v. New York Thruway Authority, 584 F.3d 82, 88 (2d Cir. 2009). At the

motion-to-dismiss stage, all allegations of fact in the complaint must be

accepted as true and construed in the light most favorable to the

plaintiff. Thompson v. Cnty. of Franklin, 15 F.3d 245, 249 (2d Cir.

1994). A complaint must have sufficient factual allegations to “state a

claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 566 U.S.

662, 678 (2009) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 570

(2007)). A claim is facially plausible “when the pleaded factual content


22

allows the court to draw the reasonable inference that the defendant is

liable for the misconduct alleged.” Id.

II. The District Court Erred in Holding That Allco Lacked Standing.

The District Court held that Allco lacked both Article III and

prudential standing to bring its claims. As explained below, that

decision was incorrect: Allco satisfies both standing requirements.

A. Allco Has Article III Standing.

To establish Article III standing, Allco must demonstrate “(1)

injury-in-fact, which is a ‘concrete and particularized’ harm to a ‘legally

protected interest’; (2) causation in the form of a ‘fairly traceable’

connection between the asserted injury-in-fact and the alleged actions of

the defendant; and (3) redressability, or a non-speculative likelihood

that the injury can be remedied by the requested relief.” W.R. Huff

Asset Mgmt. Co., LLC v. Deloitte & Touche LLP, 549 F.3d 100, 106-07

(2d Cir. 2008) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-

61 (1992)). As explained below, Allco can meet these requirements

under two distinct theories of injury.


23

1. Allco’s Loss of the Contract Is Sufficient to Establish Standing.

First, Allco can establish standing based on its failure to prevail in

the Commissioner’s procurement. Allco’s theory of standing is identical

to the theory of any disappointed bidder challenging any procurement.

It suffered an injury-in-fact based on its economic interest in the

procurement; that injury-in-fact was caused by the Commissioner’s

illegal actions in connection with the procurement; and that injury-in-

fact would be redressed when the Commissioner makes a revised

determination in the challenged procurement or conducts a new

procurement complying with federal law. If Allco lacked constitutional

standing to bring this suit, then virtually all statutes that allow bidders

to bring bid protests in federal court would be unconstitutional under

Article III. That cannot possibly be the law. See generally 28 U.S.C.

§ 1491(b)(1) (authorizing bid protests in federal court); B.K. Instrument,

Inc. v. United States, 715 F.2d 713 (2d Cir. 1983) (collecting authority

establishing, under certain circumstances, bidders’ right to protest

contract awards). As explained below, the District Court’s contrary

reasoning is contrary to hornbook law on standing in competitive

procurements.


24

a. Allco established injury-in-fact.

First, although the District Court’s opinion is ambiguous on this

point, the District Court appeared to hold that Allco could not show a

“concrete, particularized injury.” The Court distinguished other

authority in which generators lost “millions of dollars” on the ground

that “Allco has suffered no such injury and despite not being awarded

this particular contract remains free to sell whatever energy it wishes

in the open market, underscoring the reality that the true injury alleged

is the denial of the contract.” A213.

Although this reasoning is difficult to understand, the District

Court appeared to hold that Allco could not show a concrete injury

because it could not guarantee that it lost the procurement due to the

Commissioner’s violation of federal law. If this was the District Court’s

reasoning, it is plainly wrong. See Clinton v. City of New York, 524

U.S. 417, 433 n.22 (1998) (“The Government argues that there can be

an Article III injury only if [plaintiff] would have actually obtained a

facility on favorable terms. We have held, however, that a denial of a

benefit in the bargaining process can itself create an Article III injury,

irrespective of the end result.”); cf. Natural Resources Defense Council,


25

Inc. v. FDA, 710 F.3d 71, 81 (2d Cir. 2013) (plaintiff can establish

injury-in-fact based on showing of increased risk of harm, even when

harm is not guaranteed). Indeed, the District Court cited authority

holding that in the Equal Protection context, a disappointed bidder is

recognized as having standing even without alleging he would have

obtained the benefit but for the illegal barrier. A212 n.3 (discussing Ne.

Fla. Chapter, Associated Gen. Contractors of Am. v. Jacksonville, 508

U.S. 656, 666 (1993)). As the Supreme Court subsequently

underscored, Jacksonville establishes that under Article III, prospective

bidders could establish an injury-in-fact “even though there was no

showing that any party would have received a contract absent the

ordinance.” Clinton, 524 U.S. at 433 n.22. As such, it is difficult to

understand how the District Court could have held that, under Article

III, Plaintiffs failed to show an injury-in-fact.5

5 The District Court also observed that “despite not being awarded this particular contract,” Allco “remains free to sell whatever energy it wishes in the open market.” A213. This observation has nothing to do with Plaintiff’s standing; the fact that Allco may continue to attempt to enter a contract, or choose to sell its output into an energy market where prices are volatile, does not mean it lacks standing to challenge the loss of a valuable contract. See also infra note 9. Moreover, if the District Court’s conclusion were correct, then there is no action the Commissioner could ever take, including compelling a wholesale sale


26

b. Allco established causation.

The District Court correctly did not dispute that Allco could show

causation. Allco alleges that the Commissioner violated federal law by

failing to restrict the procurement to Qualifying Facilities under

PURPA. This “denial of a benefit in the bargaining process,” Clinton,

524 U.S. at 433 n.22, was plainly caused by the Commissioner’s own

decision to include non-Qualifying Facilities in the procurement.

c. Allco established redressability.

Although the District Court did not contest causation, it held that

Allco could not show redressability because it could not guarantee it

would be awarded a new contract in a re-procurement. The Court

rejected Allco’s contention that it would receive a new contract based on

its high ranking in the original solicitation, observing that “nothing in

the statute mandates that projects be selected based upon their

ranking.” A213. The District Court also hypothesized that the

Commissioner might just stop conducting procurements. A212-A213.

Each of these reasons is seriously flawed.

without asking for bids, that would be able to be challenged because a would-be generator is always in theory able to sell its energy on the open market.


27

The District Court’s first theory – that despite Allco’s high

ranking in the first procurement, the Commissioner might simply have

selected a lower-ranked bidder in a follow-up procurement – is wrong

for multiple reasons. First, it misunderstands the injury-in-fact at

issue. As the Supreme Court held in Clinton, “denial of a benefit in the

bargaining process can itself create an Article III injury,” regardless of

whether the bidder would ultimately have won the procurement.

Clinton, 524 U.S. at 433. Allco has alleged such an injury – it alleges

that the Commissioner violated federal law by opening the procurement

up to large generators that were not Qualifying Facilities under

PURPA. Framed in those terms, Allco’s injury can surely be redressed

by the court – the court can direct that subsequent procurements be

conducted in accordance with federal law, i.e., without the presence of

large generators. By addressing whether the Court could redress

Allco’s loss of the contract, the District Court erroneously analyzed

redressability of the wrong injury.6

6 Another injury suffered by Allco is its expenditure of development costs in preparing bids for a procurement that was then conducted in violation of law, by including large generators that were not Qualifying Facilities. This injury, too, would be redressed if a new procurement were conducted.


28

Second, even assuming the redressability analysis should focus on

whether Allco would prevail in a re-procurement, the District Court’s

analysis was incorrect. To establish standing, a plaintiff is not required

to show a guarantee that the court’s actions would redress its injury;

rather, it must simply show that “it is likely, as opposed to merely

speculative, that the injury will be redressed.” Friends of the Earth,

Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000).

In the bid protest context, the Federal Circuit holds that to establish

standing, a disappointed bidder must show only that it had a

“substantial chance” of winning the procurement, which requires a

showing that it was in the “competitive range.” Orion Tech., Inc. v.

United States, 704 F.3d 1344, 1349 (Fed. Cir. 2013).

Allco’s well-pleaded allegations easily meet that standard. Allco

alleges that Harwinton Solar was ranked fourth, and next in line, on

the Commissioner’s rankings, see A13 ¶ 46, A67; this plainly put it in

the “competitive range” and gave it a “substantial chance” of winning a

procurement that complied with federal law. That is especially so

because of the size of Number Nine Wind relative to Allco’s Harwinton

Solar project and other bidders. Number Nine Wind was awarded a


29

contract for 936,443 megawatt-hours per year; by contrast, Fusion

Solar, which like Allco’s Harwinton project, was a smaller solar project,

was awarded a contract for 36,907 megawatt-hours per year. A67; see

also A13 ¶¶ 51-52, A67. Had Number Nine Wind not received a

contract, the Department would have needed to choose numerous other

smaller projects to come even close to replacing its output. It is true

that there is no guarantee that in a re-procurement, the Commissioner

would select the highest-ranking bid, and Allco’s Complaint does not

contend otherwise. But given that the whole purpose of the

Commissioner’s ranking was to select bids, it is likely – and, surely, far

from speculative –that the Commissioner would follow the result of his

own ranking process. The District Court faulted Allco for failing to

establish sufficient “support for its prediction,” A214, but at the

pleadings stage, Allco was not required to provide evidentiary support;

rather, it was required merely to show that its claims are “plausible.”

Iqbal, 556 U.S. at 678. It is “plausible,” to say the least, that the

Commissioner would follow his own rankings.7

7 In an effort to show that Allco might not prevail in a re-procurement, the District Court observed that the Commissioner selected the first- and third-ranked projects, rather than the second-ranked project.


30

The District Court also stated that Allco’s injury was not

redressable because Allco could not guarantee that the Commissioner

would conduct a new re-procurement. A214. This reasoning, too,

contradicts well-settled case law.

The Supreme Court has repeatedly and squarely held that a

plaintiff can establish standing based on the predicted behavior of

executive officials, even if that behavior is not guaranteed. In Utah v.

Evans, 536 U.S. 452 (2002), the Supreme Court held that Utah had

standing to challenge a census report, even though no executive official

had any obligation to follow the terms of the new report. Id. at 463-64.

The court found it “substantially likely” that the Executive Branch

would abide by the new report, and thus held that the “practical

consequence” of altering the report was “a significant increase in the

likelihood that the plaintiff would obtain relief that directly redresses

A213-A214. But it failed to note that the second- and third-ranked projects were offered by the same developer, which was presumably indifferent to which project would be selected. In any event, the reason for the Commissioner’s selection of the third-ranked project can be determined in discovery. At the pleadings stage, it was inappropriate for the District Court to draw inferences regarding Allco’s chances in a future procurement based on the Commissioner’s selection of the third-ranked project.


31

the injury suffered,” even though there was no guarantee that the

Executive Branch would take any action based on the court’s ruling. Id.

at 464. Similarly, in FEC v. Akins, 524 U.S. 11, 25 (1998), the Court

found that a plaintiff had “standing to obtain court determination that

the organization was a ‘political committee’ where that determination

would make agency more likely to require reporting, despite [the]

agency's power not to order reporting regardless.” Evans, 536 U.S. at

464 (describing Akins); see also id. (collecting other, similar cases).

These cases show that as long as it is likely the agency will afford relief,

the plaintiff can establish standing, even if there is a possibility that

the agency will ultimately decline to redress the plaintiff’s injury.

Here, Allco’s Complaint adequately alleges that it is likely that

the Commissioner will conduct a new procurement. A15-A16 ¶¶ 66, 67,

70. As the Complaint states, the authority given to the Commissioner

under Section 6 is a major initiative of the Governor of the State of

Connecticut, and the Department described the procurement as “an

important step forward in the implementation of Governor Daniel P.

Malloy’s vision for … [the] energy future for the ratepayers of the State

of Connecticut.” A55; A11-A12 ¶ 41. This allegation establishes that it


32

is at least likely that, if the District Court invalidates the prior

procurement, the Commissioner would conduct a procurement rather

than completely ignoring Section 6.

Moreover, the Commissioner has already conducted one

procurement under Section 6, which demonstrates a predisposition to

conduct another one. See, e.g., Monsanto Co. v. Geertson Seed Farms,

561 U.S. 139, 152 (2010) (in case where agency’s prior briefing took “the

view that a partial deregulation reflecting its proposed limitations is in

the public interest,” plaintiff could establish redressability based on the

“strong likelihood” that agency would engage in such deregulation in

the future, even though it theoretically had the option not to).

The District Court suggested that the Commissioner might change

his mind and simply halt procurements under Section 6 based on

dissatisfaction with the Court’s injunction, A214, but this speculation

was inappropriate at the motion to dismiss stage. For present

purposes, all that matters is that Allco’s Complaint surely puts forth a

plausible allegation that if the procurement is nullified, then the


33

Governor and the Commissioner would try again. 8 Indeed, the

Department has already proven the District Court’s speculation wrong.

Yesterday, the Department released a draft procurement soliciting bids

under Section 6 as well as under Section 7 of Conn. Public Act 13-303.9

2. Allco’s Reduced Prospective Earnings Under PURPA Are Sufficient to Establish Standing.

Independently, Allco has standing on the independent ground that

the procurement will affect the utilities’ cost structure in a manner that

will cause Allco to earn lower profit from future energy sales under

8 The District Court’s opinion includes the following assertion: “the Commissioner could not simply make a redetermination based on the original rankings cited by Allco, because bidders were only required to keep their bids open for six months and the bids have now expired.” A214. This assertion was not based on the Complaint or any document appended thereto. Rather, it was based on an oral argument statement by counsel for the Commissioner that had no basis in the record. Moreover, that statement was factually wrong. The relevant bid document states that the bidder agreed that the “prices, terms and conditions [were] valid for at least 180 days.” See http://www.dpuc.state.ct.us/DEEPEnergy.nsf/c6c6d525f7cdd1168525797d0047c5bf/8eb0a41a8b1efe0285257ba2006d6ffe?OpenDocument . This means that the bidders could withdraw their bids if they so chose after 180 days. There is no evidence to support the conclusion that bidders have likely withdrawn, or would likely withdraw, their bids, especially Qualifying Facilities that may have been following the progress of this case. 9 See http://cleanenergyrfp.com/


34

PURPA.10

Allco’s theory is straightforward. Under PURPA and its

implementing regulations, utilities are required to purchase power from

Qualifying Facilities, such as Allco’s facilities. See 16 U.S.C. § 824a-

3(a)(2); 18 C.F.R. § 292.303(a). Further, Qualifying Facilities are

required to be paid at a rate equal to the utility-buyer’s “avoided costs”

– that is, the costs that the utility would otherwise have incurred but

for its purchase from the Qualifying Facility. 16 U.S.C. § 824a-3(b), (d);

18 C.F.R. § 292.304(b)(2). In the case of Allco’s facilities, which need a

long-term contract (see A14 ¶ 60), the avoided cost rate is the long-term

rate under 18 C.F.R. § 292.304(d)(2)(ii).

A mathematical example is helpful to illustrate the concept of

avoided costs. Suppose a utility needs 100 MW of power, and suppose it

10 Allco strongly prefers to enter a contract under the Section 6 procurement as compared to securing a PURPA contract under another route, and thus the potential availability of a PURPA contract does not mitigate Allco’s injury. That is because, as the Complaint alleges, without a long-term power purchase agreement of the kind awarded by the Commissioner in the procurement, Allco will be unable to develop its proposed solar facilities. See A14 ¶ 60. Under Connecticut law purporting to implement PURPA, there is no process for Allco to obtain a long-term contract from the utilities. Instead, Allco would be compensated at a short-run avoided cost rate, which can be quite volatile and would not provide Allco with the same revenue assurance as the long-term contracts awarded by the Commissioner.


35

is filling that need by purchasing 25 MW of power from each of four

different generators. Further, suppose the utility is paying different

amounts of money to the four generators: $10 to the first, $20 to the

second, $30 to the third, and $40 to the fourth generator.

Now, suppose a Qualifying Facility offers 25 MW of power for sale.

The utility is generally required to buy that power from the Qualifying

Facility, subject to certain statutory exceptions and limitations. See

generally 16 U.S.C. § 824a-3(a)(2); 18 C.F.R § 292.303(a). As a result,

the utility may now shed 25 MW of its current power portfolio.

Naturally, the utility will shed its most expensive power – the 25 MW of

power that costs $40. Thus, under PURPA, the utility is required to

pay $40 to the qualifying facility. This is because the utility’s “avoided

costs” are $40 – the marginal cost the utility avoided by purchasing

power from the Qualifying Facility instead of the most expensive

generator.11

11 See Order No. 69: Final Rule Regarding the Implementation of Section 210 of the Public Utility Regulatory Policies Act of 1978, 45 Fed. Reg. 12,214, 12,216 (Feb. 19, 1980) (codified at 18 C.F.R. pt. 292) (“Order No. 69”), in which the FERC stated that avoided costs are determined by reference to the highest marginal cost unit or future expansion that would be avoided:


36

In light of that statutory scheme, it is easy to understand how

Allco was injured by the procurement. The utilities purchased power

from Number Nine Wind, relieving the utilities of the need to purchase

that power from some alternative source. Naturally, the utilities will

attempt to shed their most expensive alternative source of power first.

This means that the cost of the most expensive power in the utilities’

portfolio has decreased as a result of the procurement – in PURPA’s

lingo, its “avoided costs” have decreased. And accordingly, so too has

the rate that Allco could receive under PURPA. This injury-in-fact was

caused by the procurement, and it would be redressed if the

The Commission has added the term ‘incremental’ to modify the costs which an electric utility would avoid as a result of making a purchase from a qualifying facility. Under the principles of economic dispatch, utilities generally turn on last and turn off first their generating units with the highest running cost. At any given time, an economically dispatched utility can avoid operating its highest-cost units as a result of making a purchase from a qualifying facility. The utility’s avoided incremental costs (and not average system costs) should be used to calculate avoided costs. With regard to capacity, if a purchase from a qualifying facility permits the utility to avoid the addition of new capacity, then the avoided cost of the new capacity and not the average embedded system cost of capacity should be used.


37

procurement was invalidated. This is classic economic harm that

requires no prediction or speculation and is independently sufficient to

establish standing.

Allco explained this precise point to the District Court in its

opposition to the motion to dismiss. It stated: “Defendant ignores the

very obvious and concrete fact that the addition of a generating resource

for 15 years that represents almost 4% of the Connecticut Utilities load

has a definite adverse effect on the calculation of the Connecticut

Utilities’ avoided costs because there are fewer costs that could now be

avoided by the addition of one of Plaintiff’s projects. That, in turn,

adversely affects the price that the Plaintiff could obtain under PURPA

for any one of its projects.” Pltf. Mem. in Opp., Dkt. 34 at 13. Yet the

District Court ignored it.

Indeed, the District Court’s order demonstrates that it did not

understand how PURPA’s “avoided costs” provisions work. The District

Court stated that under PURPA, states may fix the price of energy “if

(1) the facility is a “small power production facility,” … and (2) “the rate

fixed in the power purchase agreement equals the facilities ‘avoided

costs.’’” A205 (emphasis added). The italicized portion of the District


38

Court’s opinion is incorrect. The rate is not equal to the facility’s

avoided costs. The rate is equal to the utility’s avoided costs – i.e., the

cost the utility avoided by buying from the qualifying facility. Given the

District Court’s incorrect description of PURPA’s “avoided costs”

framework, it is unsurprising that the District Court failed to address

Allco’s standing based on that framework.

Accordingly, the Court should hold that Allco has standing based

on its statutory entitlement to sell energy at a rate equal to “avoided

costs.”12

B. Allco Has Prudential Standing.

The District Court erred in holding that Allco lacked prudential

standing to bring its suit. Allco has prudential standing on two

independent grounds. First, Allco has prudential standing under the

Supremacy Clause because that constitutional provision imposes no

zone-of-interest requirement. Second, Allco has prudential standing

under the Federal Power Act because it is at least arguable that the Act

was intended to protect the interests of market participants, and in

12 Alternatively, because the District Court failed to address this issue, the Court may wish to consider remanding for further proceedings, including a possible evidentiary hearing, on this theory of standing.


39

particular those with Qualifying Facilities.

Allco’s first claim arises under two different sources of law:

directly under the Supremacy Clause, and under 16 U.S.C. § 825p, the

cause of action supplied by the Federal Power Act. See A17, Count I

(“Violation of the Federal Power Act and the Supremacy Clause”); A8

¶ 26 (noting that the Order violates both the Supremacy Clause and the

Federal Power Act); A9 ¶ 30 (citing § 825p). Thus, if Allco can show it

has prudential standing under either source of law, its case may

proceed. In fact, Allco has prudential standing under both the

Supremacy Clause and the Federal Power Act.

First, Allco has prudential standing under the Supremacy Clause

for the simple reason that the “zone of interests” requirement does not

exist in cases brought directly under the Supremacy Clause. Although

this Court has not squarely addressed the “zone of interests” rule in the

context of Supremacy Clause challenges, other circuits have rejected the

“zone of interests” requirement in Supremacy Clause cases. See, e.g.,

Pharm. Research & Mfrs. of Am. v. Concannon, 249 F.3d 66, 73 (1st Cir.

2001) (“PhRMA has … asserted … a preemption-based challenge under

the Supremacy Clause. In this type of action, it is the interests


40

protected by the Supremacy Clause, not by the preempting statute, that

are at issue…. As the Third Circuit recently pointed out, an entity does

not need prudential standing to invoke the protection of the Supremacy

Clause … Thus, regardless of whether the Medicaid statute’s relevant

provisions were designed to benefit PhRMA, PhRMA can invoke the

statute’s preemptive force” (citing St. Thomas-St. John Hotel & Tourism

Ass’n v. Virgin Islands, 218 F.3d 232, 241 (3d Cir. 2000))); Taubman

Realty Group Ltd. Partnership v. Mineta, 320 F.3d 475, 481 (4th Cir.

2003) (plaintiff “does not have to meet the additional standing

requirement involving the zone of interests test with respect to its

Supremacy Clause claim”); see also Wilderness Soc’y v. Kane County,

632 F.3d 1162, 1170 (10th Cir. 2011) (en banc) (collecting authority

holding that the zone-of-interests requirement does not apply in the

Supremacy Clause context). This authority is consistent with the

Supreme Court’s recent observation that rejecting claims “on the

grounds that are ‘prudential,’ rather than constitutional … is in some

tension with …the principle that a federal court’s obligation to hear and

decide cases within its jurisdiction is virtually unflagging.” Susan B.

Anthony List v. Driehaus, 134 S. Ct. 2334, 2347 (2014) (quotation


41

marks omitted). The District Court had no basis for imposing a judge-

made, “prudential” limitation on an action brought under a

constitutional provision that by its terms imposes no such limitation.

Second, and in the alternative, Allco has prudential standing

under the Federal Power Act. This Court has explained that the zone-

of-interests requirement is “not a rigorous one,” and that a “plaintiff’s

right of review may be denied only if the plaintiff’s interests are so

marginally related to or inconsistent with the purposes implicit in the

statute that it cannot reasonably be assumed that Congress intended to

permit the suit. The test is not meant to be especially demanding.”

Selevan, 584 F.3d at 91-92 (internal citations and quotation marks

omitted, emphasis in original). The “requirement is satisfied whenever

the interest sought to be protected by [plaintiffs] is arguably within the

zone of interests to be protected or regulated by the statute or

constitutional guarantee in question.” Id. (internal citations and

quotation marks omitted, emphasis in original). Further, “for a

plaintiff’s interests to be arguably within the ‘zone of interests’ to be

protected by a statute, there does not have to be an indication of

congressional purpose to benefit the would-be plaintiff.” Nat’l Credit


42

Union Admin. v. First Nat’l Bank & Trust Co., 522 U.S. 479, 492 (1998)

(internal quotation marks omitted). Rather, the court must “first

discern the interests ‘arguably ... to be protected’ by the statutory

provision at issue” and then “inquire whether the plaintiff’s interests

affected by the agency action in question are among them.” Id. (ellipsis

in original).

Allco easily satisfies that modest requirement. This case concerns

the Federal Power Act’s preemption of state law, which serves to protect

“areas of exclusive federal authority” from state regulation. Nazarian,

753 F.3d at 475-76. Here, Congress has decided to protect wholesale

electricity sales, as negotiated in contracts between generators and

utilities, from state regulation. Id. at 477-78. It is at least arguable –

and in fact, it is almost self-evident – that Congress intended to protect

the interests of the very entities who are negotiating those transactions

and are directly subject to those regulations.

Abundant authority supports the proposition that Allco falls

within the Federal Power Act’s zone of interests. In determining who

may seek review of FERC orders in violation of the Federal Power Act,

this Court has taken an extremely expansive view of the Federal Power


43

Act’s zone of interests, going as far as to hold that plaintiffs pursuing

non-economic interests may bring suit to enforce the Federal Power Act.

Scenic Hudson Preservation Conference v. FPC, 354 F.2d 608, 615-16

(2d Cir. 1965). Courts have also repeatedly found that market

participants possess prudential standing under the Federal Power Act

and similar regulatory schemes. See, e.g., La. Energy & Pub. Auth. v.

FERC, 141 F.3d 364, 367 n.5 (D.C. Cir. 1998) (citing cases).

Moreover, in Nazarian, also a preemption case like this one, the

Fourth Circuit vindicated the interests of plaintiffs who were market

participants like Allco, without even addressing standing, even though

the issue had been briefed to the court. See Brief of the Maryland

Public Service Commission, PPL EnergyPlus v. Nazarian, No. 13-2419,

2014 WL 413948, at *6-*14. There is simply no basis for holding that

Allco, an electric generator squarely under FERC’s jurisdiction, is

inarguably outside of the Federal Power Act’s zone of interests.

Moreover, Allco contends here that the Federal Power Act

precludes state regulation of state rates except as permitted by PURPA,

and it is absolutely clear that Allco is within the “zone of interests”

protected by PURPA. PURPA was enacted for the express purpose of


44

creating a new class of “favored cogeneration and small power facilities”

in the overall regulatory scheme. FERC v. Mississippi, 456 U.S. 742,

751 (1982). It did so by enacting a limited exception, applicable to such

facilities, to the blanket prohibition on state regulation of wholesale

energy sales, as well as an open access interconnection and

transmission policy for such generators. 16 U.S.C. §824a-3. Allco, as a

favored Qualifying Facility under PURPA, is precisely the type of

plaintiff Congress intended to benefit when it enacted PURPA. Here, of

course, Allco brings an action based on the Federal Power Act’s

preemptive provisions rather than under PURPA. But Allco’s

contention is that the Federal Power Act’s preemptive provisions are

necessary to render PURPA effective – by preempting state regulation

except as to Qualifying Facilities such as Allco’s, the Federal Power Act

ensures that Qualifying Facilities are singled out for favored treatment.

Allco surely falls within the “zone of interests” of this statutory scheme.

In rejecting this straightforward reasoning, the District Court

held that there was “no provision of the complex regulatory scheme that

evinces a concern for bidders’ rights,” and that “Congress had quite

another purpose in mind with the enactment of the Federal Power Act,


45

which was to provide effective federal regulation of the expanding

business of transmitting and selling electric power in interstate

commerce.” A212 (quotation marks omitted). This analysis is clearly

wrong for several reasons. For one, given that the bidders are the very

entities who are in the “business of transmitting and selling electric

power in interstate commerce,” and the very entities who are directly

affected by the state regulation that is preempted, it is difficult to

understand how the Court could not identify a “concern” for the interest

of those entities. For another, PURPA plainly establishes a concern for

Qualifying Facilities insofar as they attempt to negotiate power

purchase agreements – i.e., are “bidders.”

More fundamentally, the Supreme Court rejected the District

Court’s mode of analysis in National Credit Union. There, the Court

considered a statute which provided that “[f]ederal credit union

membership shall be limited to groups having a common bond of

occupation or association, or to groups within a well-defined

neighborhood, community, or rural district.” 522 U.S. at 482-83

(quotation marks omitted). A group of banks brought suit seeking to

use this provision to avoid competition from federal credit unions. Id. at


46

485. The Supreme Court held that the banks had prudential standing

because the statute demonstrates an “interest in limiting the markets

that federal credit unions can serve,” and the banks share that same

interest. Id. at 493-94. The Court squarely rejected the argument that

Congress’s purpose in enacting the statute was “to create a new source

of credit for people of modest means” rather than to benefit banks,

holding that Congress’s purpose was irrelevant to the prudential

standing analysis. Id. at 496-98.

So too here. Even if the District Court was correct in identifying

some distinction between the goal of “provid[ing] effective federal

regulation of the expanding business of transmitting and selling electric

power in interstate commerce” and the goal of assisting bidders for that

electric power, it erred in holding that distinction was relevant to

prudential standing. Regardless of the existence of any express

evidence of congressional intent to benefit bidders for utility contracts,

it is at least arguable that the Federal Power Act’s preemptive

provisions protects such bidders, which is sufficient to establish

prudential standing.

The District Court relied on Gosnell v. FDIC, 938 F.2d 372, 375


47

(2d Cir. 1991), but that case is far afield. In Gosnell, the FDIC

liquidated a bank and sold its artwork to a museum. Id. at 373-74. The

plaintiff was an art collector who sought to prevent this sale so he could

bid on the artwork. Id. at 374. This Court held that the plaintiff lacked

prudential standing, because federal law gave “the FDIC broad

discretion in disposing of the assets under its control” and “consciously

decided not to impose” a requirement for competitive bidding on the

FDIC. Id. at 376. Thus, the court reasoned, “were we to allow

disappointed bidders such as Gosnell to challenge the manner in which

the FDIC chooses to dispose of its assets, we would undermine

Congress’ intent to allow the FDIC broad discretion in the disposition of

its assets.” Id.

Even assuming Gosnell remains good law in light of National

Credit Union13, it is poles apart from this case. In Gosnell, the Court

relied solely on the fact that FIRREA granted the FDIC, a government

agency, the complete discretion to make whatever transactions it

13 It is also doubtful that Gosnell remains good law in light of subsequent authority showing that the Court’s analysis of Gosnell’s claim went to the merits, not to Gosnell’s standing. See, e.g., Chabad Lubavitch of Litchfield County, Inc. v. Litchfield Historic Dist. Comm’n, 768 F.3d 183, 200-02 & n.15 (2d Cir. 2014), petition for cert. filed, No. 14-1001.


48

wished. Here, however, Allco relies on the preemptive provisions of the

Federal Power Act, which prevents state agencies from involving

themselves in wholesale market transactions. The Federal Power Act

plainly does not grant state agencies “a wide range of discretion” in this

area, id. at 376, and Gosnell’s reasoning is thus wholly irrelevant to the

prudential standing inquiry.

III. Allco’s Complaint Stated a Preemption Claim.

The District Court erred in dismissing Allco’s preemption claim.

Allco stated a preemption claim on two independent grounds. First,

Allco stated a field preemption claim based on its allegation that the

Commissioner improperly regulated wholesale energy sales, which fall

exclusively within federal jurisdiction. Second, Allco stated a conflict

preemption claim based on its allegation that the Commissioner’s

actions conflicted with FERC’s regulatory scheme.

A. Legal Standard Governing Preemption.

The Supreme Court has recognized two distinct types of

preemption: field preemption and conflict preemption. See Crosby v.

National Foreign Trade Council, 530 U.S. 363, 372-73 (2000).

Under the theory of field preemption, state action is preempted


49

when it intrudes into an area that Congress has occupied for exclusive

federal regulation. See Silkwood v. Kerr-McGee Corp., 464 U.S. 238,

248 (1984) (“If Congress evidences an intent to occupy a given field, any

state law falling within that field is pre-empted.”). When Congress has

reserved a field for exclusive federal regulation, a plaintiff need not

demonstrate any actual conflict with federal regulation in order to

demonstrate preemption; it is enough that the state has acted in a field

that is forbidden to it. See Nazarian, 753 F.3d at 474 (“Actual conflict

between a challenged state enactment and relevant federal law is

unnecessary to a finding of field preemption; instead it is the mere fact

of intrusion that offends the Supremacy Clause.”). Indeed, the Supreme

Court has held that “[w]here Congress occupies an entire field, … even

complementary state regulation is impermissible. Field preemption

reflects a congressional decision to foreclose any state regulation in the

area, even if it is parallel to federal standards.” Arizona v. United

States, 132 S. Ct. 2492, 2502 (2012).

Under the theory of conflict preemption, state action is preempted

when it “‘stands as an obstacle to the accomplishment and execution of

the full purposes and objectives of Congress.’” Crosby, 530 U.S. at 373


50

(quoting Hines v. Davidowitz, 312 U. S. 52, 66-67 (1941)).

B. FERC Enjoys Exclusive Authority to Regulate Wholesale Electricity Sales, and Has Used That Authority to Implement a Market-Based Regulatory Scheme.

As the Fourth Circuit recently recognized, “A wealth of case law

confirms FERC’s exclusive power to regulate wholesale sales of energy

in interstate commerce.” Nazarian, 753 F.3d at 475; see, e.g., S. Cal.

Edison, 376 U.S. at 215-16 (“Congress meant to draw a bright line,

easily ascertained, between state and federal jurisdiction…. This was

done … by making [FERC] jurisdiction plenary and extending it to all

wholesale sales in interstate commerce except those which Congress

has made explicitly subject to regulation by the States.”); New England

Power Co. v. New Hampshire, 455 U.S. 331, 340 (1982) (the Federal

Power Act “delegated to [FERC] exclusive authority to regulate the

transmission and sale at wholesale of electric energy in interstate

commerce, without regard to the source of production”); Pa. Water &

Power Co. v. FPC, 193 F.2d 230, 239 (D.C. Cir. 1951) (through the

Federal Power Act, Congress has “occupied the field with regard to

interstate wholesale rates of electric companies.”), aff’d, 343 U.S. 414

(1952); Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667,


51

723 (D.C. Cir. 2000) (noting “FERC's exclusive jurisdiction over all

aspects of wholesale sales”)., aff’d, 535 U.S. 1 (2002).14

Thus, for example, the Federal Power Act gives FERC exclusive

authority not only to set all “rates and charges made, demanded, or

received … in connection with the transmission or sale of electric energy

subject to the jurisdiction of the Commission,” but also “all rules and

regulations affecting or pertaining to such rates or charges.” 16 U.S.C.

§ 824d(a).

FERC has exercised its authority by adopting a market-based

regulatory structure for the New England region. See Blumenthal, 552

F.3d at 878. As discussed above, supra at 8-9, FERC has established,

through ISO-New England, an interstate auction market on which

14 With respect to the Federal Power Act, even the ordinary presumption against preemption of traditional state authority has no application. Cf. A15 (District Court invoking the presumption against preemption). Wholesale electricity sales in interstate commerce were never subject to state regulation, see New York, 535 U.S. at 6, and thus the Federal Power Act does not displace the state’s traditional police powers. What is more, the presumption “is not triggered when the State regulates in an area where there has been a history of significant federal presence,” United States v. Locke, 529 U.S. 89, 108 (2000), which is true of wholesale electricity regulation. See Nazarian, 753 F.3d at 477; see also Pub. Utils. Dist. No. 1 v. IDACORP, Inc., 379 F.3d 641, 648 n.7 (9th Cir. 2004) (“This presumption is almost certainly not applicable here because the federal government has long regulated wholesale electricity rates.”).


52

electricity is bought and sold in real time. Blumenthal, 552 F.3d at 878

(describing the auction mechanism). FERC has also allowed

generators, through “market-based tariffs,” to enter into “freely

negotiated contracts with purchasers.” Morgan Stanley, 554 U.S. at

531.

The rationale for FERC’s policy is that the dynamics of the free

and competitive marketplace will enable buyers to obtain electricity at

the lowest prices. See Pub. Util. Dist. No. 1 of Snohomish Cnty. v.

Dynegy Power Mktg., Inc., 384 F.3d 756, 760 (9th Cir. 2004) (explaining

that “a seller cannot raise its price above the competitive level without

losing substantial business to rival sellers unless the seller has market

power,” and therefore, in a competitive market in which sellers lack

market power, there is “strong reason to believe that sellers will be able

to charge only just and reasonable rates”) (internal quotation and

citation omitted).

C. The Commissioner’s Order Compelling a Contract With Number Nine Wind Farm Is Preempted. 1. The Commissioner Has Unlawfully Regulated in the

Field of Wholesale Sales and, Moreover, Has Acted in Conflict With FERC’s Policy.

Allco has stated a claim under both a field preemption theory and


53

a conflict preemption theory.15 Here, the state has waded into FERC’s

field of regulation and adopted a regulatory scheme different than

FERC’s: one in which state commissions can compel entry into a

wholesale electricity contract, and do so at a price that is neither the

FERC-regulated market price resulting from the ISO-New England

auction, see supra at 14 (explaining that the contract price differs from

the market price), nor a price that is freely negotiated between seller

and purchaser.

Under the Federal Power Act, however, only FERC gets to make

the rules governing wholesale electricity transactions. As Justice Scalia

has noted, “[i]t is common ground that if FERC has jurisdiction over a

subject, the States cannot have jurisdiction over the same subject.”

15 The District Court stated, A215, that Allco was only advancing a field pre-emption argument (citing Tr. 32 [A58]). That is incorrect. The Complaint and the Memorandum in opposition to the motion to dismiss clearly set forth both a field and a conflict preemption claim. See A17-A18 ¶¶ 76, 79, 84-85 (field preemption); A18 ¶ 80; A111 ¶¶ 92-94 (conflict preemption); Pltf. Mem. in Opp., Dkt. 34 at 18-21. The page of the oral argument transcript cited by the District Court merely states that, in order to establish field preemption, a plaintiff need not demonstrate any actual conflict. A168. On the preceding transcript page, counsel described the “market distortion” – i.e., the actual conflict – that results from the Commissioner’s action. A167. And subsequently counsel made clear that Allco was also alleging a conflict with federal policy. A193-A194, A196.


54

Miss. Power & Light Co. v. Miss. ex rel. Moore, 487 U.S. 354, 377 (1988)

(Scalia, J., concurring). The Commissioner’s actions both intrude on the

field reserved exclusively for FERC, and thus are field preempted, and

also conflict with FERC’s chosen market-based regulatory approach and

the favored status and rights of Qualifying Facilities under the Federal

Power Act, and thus are conflict preempted as well. Cf. A222 (District

Court asserting “there is no market distortion”).

Although the District Court did not dispute the basic proposition

that FERC enjoys exclusive authority over wholesale electricity sales,

A217, it nevertheless found that the Commissioner’s action fell outside

that field because the Department merely received bids offered by

generators, and then chose among those bids and compelled the utilities

to accept them. See A218-19 (“Defendant plays no role in determining

the price offered by bidders.”). According to the District Court, state

action can be preempted only if it “in fact ‘fixed’ the contract prices.”

A220.

That is incorrect. The federal field is not narrowly limited to

wholesale pricing. As the plain language of the statute makes clear,

federal authority extends to “the sale of electric energy at wholesale in


55

interstate commerce” more broadly, 16 U.S.C. § 824(b)(1), and includes

“all rules and regulations affecting or pertaining to such rates or

charges.” Id. § 824d(a); see also Nazarian, 753 F.3d at 475 (describing

the “breadth of [Congress’s] grant of authority” to FERC in the Federal

Power Act and the statute’s “capacious substantive and remedial

provisions”). That grant of authority to FERC includes the power to

regulate the circumstances and prices under which buyers and sellers

are permitted to enter wholesale electricity contracts, as well as

whether such contracts must be voluntary. And it precludes states from

deciding otherwise.

Indeed, if states were free to compel their utilities to enter into

whichever wholesale electricity transactions that the state preferred,

including at prices different than the market price for electricity,

FERC’s entire market-based regulatory scheme could unravel. State-

mandated purchasing decisions could be guided by any number of

factors other than cost – indeed, the Department used undisclosed non-

price criteria in this very case – and thus FERC’s goal of establishing a

competitive market designed to meet demand at least cost would be

frustrated. Thus, it is simply irrelevant that the state “play[ed] no role


56

in determining the price offered by bidders.” A222. The state

compelled the utilities to enter contracts with the State’s chosen

winners, and thereby mandated a wholesale sale of electricity that

would not have taken place absent the state’s compulsion. And the

Supreme Court has held that the Federal Power Act “left no power in

the states to regulate … sales for resale in interstate commerce.” S.

Cal. Edison, 376 U.S. at 215.

2. Recent Decisions by the Third and Fourth Circuits Confirm That the Commissioner’s Actions Were Preempted.

The Nazarian decision from the Fourth Circuit, 75 F.3d 467, and

the Solomon decision from the Third Circuit, 766 F.3d 241, found state

programs materially identical to the one in this case to be preempted.

In both those cases, just like this one, the state solicited bids from

generators, who named the price at which they were willing to sell. The

state then selected winning bidders, and compelled the utilities to enter

into contracts guaranteeing the winning bidders a fixed long-term

revenue stream for the sales of electricity – which was a price different

than the market-price in the FERC-regulated auction market, just as

the contract price here is different than the market price the generator


57

would receive from the ISO-New England energy market, supra at 14;

see PPL EnergyPlus LLC v. Nazarian, 974 F. Supp. 2d 790, 822 (D. Md.

2013) (describing selection process), aff’d, 753 F.3d 467 (4th Cir. 2014),

petitions for cert. filed, Nos. 14-614, 14-623; PPL EnergyPlus LLC v.

Hanna, 977 F. Supp. 2d 372, 393-94 (D.N.J. 2013) (describing selection

process), aff’d, 766 F.3d 241 (3d Cir. 2014), petitions for cert. filed, Nos.

14-634, 14-694.

The only material difference between those cases and this one

involved the pricing mechanism used by the state to guarantee the fixed

long-term revenue stream. In those cases, the states adopted what is

known as a “contract-for-differences”: the winning bidders would sell

into the market, and if market revenues fell below the contract price,

the utilities would make up the difference. If market revenues exceeded

the contract price, the winning bidders would remit the excess back to

the utilities. See Solomon, 766 F.3d at 252; Nazarian, 753 F.3d at 473-

74. The states argued in those cases that the contract-for-differences

was a mere side financial arrangement akin to a hedge, and was not

part of any sale of electricity. And the key question in those cases was

whether the side payments were sufficiently connected with the sale of


58

electricity that they fell within the federal regulatory field. The courts

held that they were. Nazarian, 753 F.3d at 476; Solomon, 766 F.3d at

252-53.

This case is much simpler, and the intrusion into the federal field

is much more obvious and direct. Rather than providing generators

with revenue assurance by compelling utilities to enter into a

complicated contract-for-differences, here the Commissioner has simply

compelled the utilities to buy the electricity itself. Thus, there can be

no question in this case that the Commissioner regulated in the field of

wholesale sales.16

The District Court sought to distinguish Nazarian and Solomon on

the ground that those cases involved state schemes with “market-

16 The power purchase agreement used in this case is economically identical to the contract-for-differences at issue in Nazarian and Solomon, as is illustrated in the following example: In both cases, the generator submits a bid to the state specifying the long-term rate per megawatt or megawatt-hour that the generator needs to be guarantee (for example, $60). Suppose that the market price for energy is $50. Under a power purchase agreement like the one here, the generator sells to utility for $60. The utility then resells into the spot market (or avoids purchases from the spot market) at $50. Under the contract-for-differences, the generator sells into the spot market at $50. The utility makes a side payment to the generator of $10. In both cases, the generator’s net revenue is $60 and the utility’s net cost is $10.


59

distorting features.” A222. However, that effort to distinguish the

cases fails, for two reasons. First, the presence or absence of market

distortion is simply irrelevant to field preemption. As noted above,

under the doctrine of field preemption, state action is preempted merely

because it lies within an exclusive federal field – even when the state

action is complementary to federal policy. See supra at 48-49. Second,

while market distortion might be relevant to the doctrine of conflict

preemption, the complaint does allege a conflict with federal policy:

specifically, Congress has chosen to allow states to compel wholesale

contracts only for Qualifying Facilities under PURPA, and has not

made the same accommodation for larger renewable projects like

Number Nine Wind, which are expected to compete on their own merits

in the FERC-regulated wholesale market. Interference with that policy

will impede the achievement of Congress’s goals in enacting PURPA.

See A18 ¶ 82; A20 ¶¶ 92-94; see also A167, A193-194 (transcript pages

in which counsel explains how the Commissioner’s actions distort the

market). At the motion-to-dismiss stage, the District Court was

required to treat that well-pleaded allegation as true; instead, the

District Court simply ignored it.


60

3. The Commissioner’s Actions Do Not Fall Within the State’s Authority to Direct Utility Planning and Resource Decisions.

To be sure, as the District Court recognized, states do retain

power to “‘direct the planning and resource decisions of utilities under

their jurisdiction.’” A220 (quoting Entergy Nuclear Vermont Yankee,

LLC v. Shumlin, 733 F.3d 393, 417 (2d Cir. 2013)). For example, states

are not preempted within their own borders from mandating the

construction of new generation capacity or from regulating the terms on

which power plants are built and retired. Conn. Dep’t of Public Utility

Control v. FERC, 569 F.3d 477, 481 (D.C. Cir. 2009); PJM

Interconnection, L.L.C., 135 FERC ¶ 61,022 at P 142 (2011) (a state

may “act within its borders to ensure resource adequacy or to favor

particular types of new generation”), clarified on reh’g, 137 FERC ¶

61,145 (2011).

But the state’s power in this regard is not unbounded. As the

statute makes clear, states retain such authority “except as specifically

provided” by the Federal Power Act, 16 U.S.C. § 824(b)(1) – and the

Federal Power Act expressly provides that FERC shall have exclusive

authority over wholesale electricity sales. Thus, a state cannot invoke


61

its authority over resource planning decisions in order to justify the

regulation of wholesale sales. If it could, the ability of FERC to

effectuate a comprehensive regulatory scheme would be seriously

undermined. See Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 308-

09 (1988) (holding preempted a state law “whose central purpose is to

regulate matters that Congress intended FERC to regulate”); id. at 310

(“When a state regulation ‘affect[s] the ability of [FERC] to regulate

comprehensively . . . the . . . sale of natural gas, and to achieve the

uniformity of regulation which was an objective of the Natural Gas Act’

or presents the ‘prospect of interference with the federal regulatory

power,’ then the state law may be pre-empted even though ‘collision

between the state and federal regulation may not be an inevitable

consequence.’” (quoting N. Natural Gas Co. v. State Corp. Comm’n, 372

U.S. 84, 91-92 (1963) (second ellipses added))).17

Accordingly, when states (including Connecticut) have sought to

encourage renewable generation, they have typically done so in ways

that avoid compelling particular wholesale electricity transactions. For

example, they have required utilities to build their own renewable

17 In this respect, the Natural Gas Act and the Federal Power Act are interchangeable. See Nazarian, 753 F.3d at 477.


62

generation facilities. Or, as discussed above, supra at 11-12, they have

adopted renewable portfolio standards that require utilities to source a

certain percentage of their electricity needs from renewable facilities,

but stop short of compelling a utility to enter a wholesale contract with

a particular generator chosen by the state.

Here, by contrast, the Commissioner went so far as to mandate a

wholesale electricity transaction at a price different than the prevailing

market price for electricity. In doing so, he exceeded the limits of state

authority, in violation of the Federal Power Act and the Supremacy

Clause. The Commissioner’s action can be defended only to the extent

that it falls within the narrow exception provided by PURPA, which, as

noted above, does allow states to compel transactions with Qualifying

Facilities. While one of the generators selected by the Commissioner,

Fusion Solar, does appear to satisfy the requirements for a Qualifying

Facility, Number Nine Wind does not. Qualifying Facilities must be

smaller than 80 megawatts in size, and Number Nine Wind was 250

megawatts.

Nor can the Commissioner claim to be acting pursuant to the

state’s reserved power under Section 16 U.S.C. §824(b)(1) with respect


63

to “facilities used for the generation of electric energy.” 16 U.S.C.

§ 824(b)(1). Whatever the scope of that reserved authority, it is limited

to facilities within the state’s own borders. Number Nine Wind is

located in Maine, not Connecticut. Connecticut does not have, and

never did have, the right to regulate the siting and building of physical

generation facilities located in other states. As the Supreme Court

observed “the legislative history [of the Federal Power Act] is replete

with statements describing Congress’ intent to preserve state

jurisdiction over local facilities.” New York, 535 U.S. at 535 (emphasis

added). Local facilities are facilities within a state’s own borders, not

facilities located several states away.

Accordingly, the Commissioner’s action compelling the utilities to

enter into wholesale energy contracts with Number Nine Wind was

preempted, and those contracts are void ab initio.

IV. The District Court Erred in Dismissing Allco’s Claim Under 42 U.S.C. § 1983.

42 U.S.C. § 1983 affords remedies for deprivation of “rights” under

statutes as well as the Constitution, see Maine v. Thiboutot, 448 U.S. 1

(1980) (§ 1983 claim for deprivation of any federal statutory right),

provided that Congress has not foreclosed such an enforcement in the


64

statute itself, Marshall v. Switzer, 10 F.3d 925, 928 (2d Cir. 1993). The

statute invoked must unambiguously confer a “right” not just some

benefit or interest, see Gonzaga University v. Doe, 536 U.S. 273, 283

(2002). A statute creates a right enforceable under § 1983 “only if it is

‘sufficiently specific and definite’ to be within the competence of the

judiciary to enforce.” Marshall, 10 F.3d at 928 (citing Wright v. Roanoke

Redev. & Hous. Auth., 479 U.S. 418, 432 (1987)), and the statute

imposes a binding obligation on the government unit rather than

merely expressing a congressional preference for a certain kind of

conduct. Id.

PURPA clearly “focuses” on small and nontraditional energy

supplying facilities such as Allco’s, who hence are “intended

beneficiar[ies]” thereof. The Federal Power Act and PURPA

undisputedly place binding obligations on the Commissioner, and the

interests asserted by Allco are not so vague or amorphous that they are

beyond the competence of the judiciary to enforce. “Once a plaintiff

demonstrates that a statute confers an individual right, the right is

presumptively enforceable by §1983.” See Gonzaga University, 536 U.S.

at 284. Congress’ intent to exclude other remedies like § 1983, when not


65

expressly stated, will be implied only when the statute which creates

the right also provides a “comprehensive” statutory remedy. See

Middlesex County Sewage Authority v. Nat’l Sea Clammers Ass’n, 453

U.S. 1, 19-21 (1981). Congress’ adoption of a broad Federal Tort Claims

Act [FTCA] did not implicitly exclude § 1983 remedies because the

former lacked the damages remedies and deterrents, as well as a jury

trial right. See Carlson v. Green, 446 U.S. 14, 20-23 (1980). See also,

Wheelabrator Lisbon, Inc. v. Conn. Dep't of Pub. Util. Control, 531 F.3d

183 (2d Cir. 2008) (PURPA generator brought suit under 42 U.S.C.

§ 1983, seeking declaratory and injunctive relief and this Court

addressed the merits and did not question whether a § 1983 action

could be brought.)

Neither the Federal Power Act nor PURPA provide a

“comprehensive” remedial scheme such that an action under 42 U.S.C.

§ 1983 is implicitly excluded. First, PURPA does not authorize a

district court enforcement action against a regulated public utility – i.e.

PURPA specifically permits suit exclusively against a state regulatory

body and unregulated utilities, and against no one else regardless of

fault or damages causation, see Niagara Mohawk Power Corp. v. FERC,


66

306 F.3d 1264, 1268 (2d Cir. 2002) (cannot even sue FERC).

Second, damages, and/or individualized or retrospective relief plus

attorney’s fees, are unavailable under the Federal Power Act or PURPA

statutes in actions such as this; rather, the claims are confined to an

effort to prospectively void state action and insure that the State

complies with Federal law in the future. This form of relief, even if

granted, could not conceivably afford the kind of expeditious remedy

required for a start-up business indefinitely frozen from operation and

losing money in order to be in operation mode while awaiting

compliance with the law. Thus, this is not an example of a viable

remedial scheme which plaintiffs merely wish to make more

“expansive,” but rather nonexistent remedies which plaintiffs wish to

supplement with § 1983 to afford the only such remedies possible. See

Carlson, 446 U.S. at 20-23. It is undisputed that when Congress, in

adopting a statutory remedy, has not explicitly excluded other

remedies, such exclusion will nevertheless be implied only when the

statutory remedy is “comprehensive.” However, if mere enactment of

any remedy suffices, no matter how limited, then “comprehensive” has

no meaning whatsoever.


67

When Congress in 1978 amended the Federal Power Act enacting

PURPA, it was well aware of § 1983 remedies and could have—but did

not—expressly state that the Federal Power Act’s (and PURPA’s)

remedies are exclusive and courts should not “lightly” infer any

exclusion of § 1983 remedies. See Smith v. Robinson, 468 U.S. 992, 1012

(1984) (repeatedly emphasized comprehensive nature of remedies

therein). The actions in Nazarian and Solomon are clear examples.

The Federal Power Act and PURPA remedies may involve a complex

scheme but there is nothing comprehensive about the remedial scheme,

in the §1983 sense.

Here, the Commissioner’s actions violated Allco’s rights under the

Federal Power Act to (i) participate in the energy market free of

unlawful action of the state, and (ii) have the avoided costs of the

utilities determined without regard to unlawful compelled wholesale

transactions. In addition, once the Commissioner decided to compel

wholesale transactions, whether he knew it or not, to the extent his

action was valid, he was exercising his authority under PURPA. Under

PURPA, a small power producer such as Allco has the right to sell the

output from its Qualifying Facility at the utilities’ avoided costs. Under


68

PURPA as relevant here, price is the only consideration. Other factors

such as permitting issues are left to other state and local officials, not

the Commissioner. The Commissioner’s actions violated Allco’s right in

respect of one of its Qualifying Facilities because the Commissioner

selected Fusion Solar, which had a higher price. The Commissioner

impermissibly discriminated against that Allco Qualifying Facility

without any legal basis, and in doing so, denied the right to sell as

provided under PURPA.

CONCLUSION

For the foregoing reasons, this Court should reverse the judgment

of the District Court and remand with instructions to deny the

Commissioner’s motion to dismiss.

Respectfully submitted this 26th day of February 2015.

/s/ Thomas Melone Thomas Melone, Esq.

Allco Renewable Energy Limited 77 Water Street, 8th floor New York, New York 10005 (212) 681-1120 [email protected]

ATTORNEY FOR APPELLANT


CERTIFICATE OF COMPLIANCE

Pursuant to Fed. R. App. P. 32 and Local Rule 32.1, I hereby

certify that this brief complies with the type-volume limitations set

forth in Fed. R. App. P. 32(a)(7)(B)(i) because this brief contains 13,417

words, as counted by Microsoft Word, excluding the items that may be

excluded under Federal Rule 32(a)(7)(B)(iii).

This brief complies with the typeface requirements of Fed. R. App.

P. 32(a)(5) because this brief has been prepared in 14-point,

proportionally spaced Century font using Microsoft Word.

/s/ Thomas Melone


CERTIFICATE OF SERVICE

I hereby certify that on the 6th day of March, 2015, I caused to be

served, using the Court’s CM/ECF system, a copy of the foregoing Brief

of Appellant and the accompanying Joint Appendix to all counsel of

record.

__/s/ Thomas Melone_________


Documents

THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT · PDF file02.03.2014 · No. 15-20 THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT ALLCO FINANCE LIMITED, Plaintiff-Appellant